Saturday, November 20, 2010

Moose Hunting - Value Investing

Just as an update, there will be no posts for the next week or so as I will be gone hunting. 

We are all packed up for another adventure into the northern forest to hunt down big bull moose.  We may also take down a whitetail deer if the opportunity presents itself. 

No running water, no toilets, no showers... just snowmobiles, a wood stove, and high powered rifles. 

Hunting and value investing do share a number of common characteristics.  You have to be very patient, survey your surroundings carefully, you have to watch for signs, and often sit inactive for long periods of time.  Often you have to pass over several animals before finding the right target.  Sometimes you have to be quick to the draw or you'll miss a great opportunity. 

Quite often patience is rewarded and you can land a trophy.

In the meantime, if you are looking for an outstanding business selling for a reasonable price I would really suggest reading up on Wells Fargo.  Between Warren Buffet and myself we collectively own 17% of the company.  When Buffett first made his initial purchase of Wells Fargo back in 1990, it was for at or around book value.  Today it sells for a slight multiple to book value.  Compared to other banks it is in a league of it's own.  Net interest margin is the highest amoung large banks and historic ROE is between 18-20%.

Best Regards,
Kevin Graham

PS. I also think there is a good possiblity that Wells Fargo will increase it's dividend in early 2011.  They have dramatically inceases their capital ratios over the past year because of the lower dividend rate. 

Disclosure: I own shares in Wells Fargo.

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